Egypt has sold $1 billion in three-year Islamic bonds, or sukuk, to Kuwait Finance House, an Islamic bank, Egypt's finance ministry said on Wednesday.

The sukuk, which carried an annual coupon of 7.875%, was the second such instrument issued since the government put a $5 billion sukuk programme in place. The first sukuk, for $1.5 billion, was sold in February 2023 with an 11% yield.

Egypt's finance minister said in April that Egypt would sell $2 billion in sukuk in 2025.

The new sukuk will help repay a $1.5 billion, 10-year Eurobond which, according to central bank data, matures this month.

The Egyptian government had been struggling to find foreign currency even before the latest fighting between Israel and Iran. The government has been forced in recent years to import increasing amounts of expensive liquid natural gas as domestic production diminishes and local consumption increases.

The fighting prompted Israel, a major gas supplier to Egypt, cut off natural gas deliveries for about two weeks, although it was due to resume deliveries on Wednesday.

The fighting may also slow the growth of tourism, which earned Egypt $8.7 billion in the second half of 2024, and further cut into Suez Canal revenue, which has been the victim of attacks on shipping by Yemen's Houthis trying to shut off Israel-bound cargo.

(Reporting by Tala Ramadan and Nafisa Eltahir; Writing by Patrick Werr; Editing by Alison Williams and Alex Richardson)